The Institute for Fiscal Studies (IFS) said average incomes
in 2014-15 are about the same as they were in 2007–08, before the banking
crisis triggered a deep recession. The average has been lifted because people
over 60 are better off. Their average income is forecast to be 1.8% higher in
2014-15 than in 2007-08, but the average income of 22- to 30-year-olds is
estimated to be 7.6% lower than before the financial crisis. While pensioners
have been hit badly by the rising cost of energy and food in recent years, they
have been helped by measures such as the “triple locking” of the state pension,
which guarantees it is raised by a certain amount. Household spending power has
risen owing to a big drop in inflation and a steady fall in unemployment, the
thinktank said. But the recovery has been slower than after the previous three
recessions because incomes have been squeezed by weak wage growth, tax
increases and benefit cuts. Andrew Hood, an IFS research economist who co-wrote
the report, said: “The young have done much worse than the old, those on higher
incomes somewhat worse than those on lower incomes, and those with children
better than those without.” The IFS said large falls in real earnings (adjusted
for inflation) have had a bigger effect on wealthier households, while poorer
households, which tend to spend a bigger share of its income on food and energy
costs, have been hit harder by the rising cost of living. GUARDIAN

RBS paid out £421m in
bonuses in 2014 despite £3.5bn loss

Royal Bank of Scotland has revealed it handed out £421m in
bonuses in 2014 as it reported its seventh consecutive year of losses. RBS said
it would reduce its operations to 13 countries, compared with 38 at the end of
last year and 51 in 2009, just after it was bailed out. The move is intended to
focus the bank on the UK. Losses have reached £43bn since the 2008 bailout.
There were also provisions of £2.2bn, including for foreign exchange rigging
and another £400m hit for compensating customers mis-sold payment protection
insurance. In an attempt to defuse any row over bankers’ pay in the runup to
the general election, chief executive Ross McEwan will not receive a £1m payout
intended to prop up his pay as a result of the EU bonus cap, which limits
bonuses to one times salaries. The £421m total bonus payout at RBS in 2014
follows the £588m paid out last year. McEwan insisted that such payments were
necessary despite another year of losses. He said he did not want his own pay
to become a distraction and said he needed to be able to motivate staff to turn
around the business. The chancellor, George Osborne, also attempted to keep the
focus on pay at the bailed-out bank, writing to the chairman to urge him to
keep RBS as a “back marker” on pay. “In the context of RBS’s conduct fines in
2014, it is right that the bonus pool is down again. I would also expect that,
as in the past, no executive directors or members of the executive committee
will receive bonuses, despite improved profitability,” said Osborne’s letter. GUARDIAN

The bumper package for chief executive Antonio Horta-Osorio
included a delayed £7.4million share bonus promised to him in 2012. It came as
Lloyds, who are 24 per cent owned by the taxpayer, announced profits jumped
fourfold to £1.8billion last year. Horta-Osorio – who pocketed a salary of more
than £1million a year – also got a £900,000 “fixed share award”, £800,000
annual bonus, £578,000 pension plus other perks. His total pot is 319 times the
average salary for a Lloyds’ worker. David Hillman, of the Robin Hood Tax
campaign, said: “It’s good news that Lloyds are returning to rude health but
that is tarnished by a part state-owned bank paying their chief executive such
lottery-sized awards.” Labour’s Shadow Treasury Secretary Cathy Jamieson added:
“People will be taken aback by the huge scale of these bonuses.” Lloyds,
rescued by a £20billion bailout in 2008, dished out a total bonus pot of
£369.5million for last year, down 3.6 per cent on 2013. DAILY RECORD

Public anger over the size of top executives' salaries is
damaging the reputation of UK firms, according to a survey of business leaders.
In a poll of more than 1,000 members of the Institute of Directors (IoD), 52%
said excessive pay packets were eroding people's trust in big companies. More
than half of those surveyed also agreed performance-related pay should be
deferred by up to three years. The poll was carried out on behalf of the High
Pay Centre think tank. In November, the IoD denounced a proposed £25m pay
package for the new head of oil and gas giant BG Group, Helge Lund, as
"excessive" and "inflammatory", while shareholders in the
firm threatened a revolt. Meanwhile, the salaries awarded to the chief
executives of Britain's biggest banks have drawn public anger. Last week, HSBC
revealed that its boss, Stuart Gulliver, was paid £7.6m in 2014, while chairman
Douglas Flint's total pay increased to £2.5m. Antonio Horta-Osorio, the chief
executive of Lloyds, which was bailed out by the government at the height of
the financial crisis, is set to receive a total remuneration package of £11m.
And the boss of Royal Bank of Scotland - another bailout recipient - announced
last week that he would not receive a bonus after the firm reported a loss of
£3.5bn for 2014, although his pay could still total almost £3m. The director of
the High Pay Centre, Deborah Hargreaves, said the think tank's findings showed
that "outside the boardrooms of big corporations, ordinary small and
medium-sized business owners are as appalled by the culture of top pay as
anybody else". She added: "When big business leaders rake in seven or
eight-figure pay packages every year, including massive bonuses regardless of
company performance, we are clearly seeing a corporate governance failure,
rather than a fair and functional free market... Ordinary workers, customers
and wider society, not to mention shareholders, are being ripped off." BBC NEWS

Banks' PPI mis-selling
compensation bill now totals £24.4bn

Payment protection insurance (PPI) was mis-sold on a massive
scale to people who did not want or need it. When compensation payouts began in
2011 the banks estimated they would have to return £4.5bn. That figure has been
revised upwards every year, as ,ore victims have come to light. The latest amount
set aside for PPI mis-selling has been detailed in banks' annual results
released over the past few days. Barclays said its provision increased by £200m
in the last three months of 2014, taking the year's total to £1.1bn. Santander
added another £30m. Lloyds, partly owned by the taxpayer, set aside a further
£700m over the same period, bringing its total for the year to £2.2bn. RBS,
which is majority-owned by the taxpayer, made an additional £400m provision, to
bring the total for the year to £650m, while HSBC allowed an additional £278m
taking its total for the year to £624m. All these amounts come on top of
billions of pounds which have been set aside by the top banks in previous
years. PPI is designed to help policyholders repay loans and credit card debts
in the event of illness, accident, redundancy or death. But it was mis-sold to
millions of people. Policies often did not pay out when people needed help.
Many sales staff did not explain PPI properly, for example to the self-employed
or those with pre-existing medical conditions who would never be able to make a
valid claim. Compensation claims have led to an average payout for millions of
people, averaging just under £3,000 each. BBC NEWS

Barclays posts
'messy' full-year loss as shares fall, boss gets £5.5m

U.K bank Barclays posted a loss in its statutory full-year
earnings on Tuesday as it set aside more money for potential fines related to
its foreign exchange operations. Adjusted pre-tax profit increased by 12
percent in 2014 to £5.5 billion ($8.46 billion), compared to the year before,
beating estimates of £5.3 billion in a Reuters poll. Adjusted net profit stood
at of £2.8 billion for the year, up 27 percent. However, the bank recorded a
statutory net loss of £174 million which includes all the one-off costs
incurred, compared to a profit of £540 million in 2013. A provision of £1.25
billion was put aside for "ongoing investigations" and potential
litigation relating to its foreign exchange operations, Barclays said. This
included an additional £750 million put aside in the last quarter of 2014 which
weighed on its earnings for that period. Many other lenders have settled or
resolved similar issues, but an ongoing probe by a New York banking regulator
means that Barclays has yet to fully realize any potential fines. "We
remain focused on addressing outstanding conduct issues," CEO Antony
Jenkins said in the report on Tuesday. "I regard the behavior at the
center of these investigations as wholly incompatible with our values, and I
share the frustration of colleagues and shareholders that matters like these
continue to cast a shadow over our business." Shares were down by over 2
percent as markets opened in Europe on Tuesday morning. The bank's bonus pool
was reduced by 47 percent, the bank said in its earnings - an average reduction
of 17 percent per employee. After turning down his bonus last year, Jenkins was
awarded £1.1 million for this 2014, bringing his total pay to £5.5m. Its
dividend for shareholders was kept at 6.5 pence per share for 2014. CNBC NEWS

Coutts, known as the
Queen's bank, is being investigated by German authorities on alleged aiding of
client tax evasion

The bank, which is owned by Royal Bank of Scotland (RBS) and
exclusively open only to those of significant financial means, said the inquiry
was focussed on its Swiss operation. The bank looks after £20bn belonging to
32,000 international customers including sovereigns, celebrities and
multimillionaire entrepreneurs. It was concentrated on not only the wealth arm
itself but also current and former employees, RBS said. The development comes
at a time when HSBC's private bank in Switzerland has been mired in controversy
over alleged collusion in tax evasion - behaviour its group chief executive
Stuart Gulliver and chairman Douglas Flint confronted in a hearing before MPs
on Wednesday. RBS chief executive Ross McEwan added: "I want to be very
clear, if we find any evidence on wrongdoing we will come down incredibly hard.
It's just not the type of behaviour we'll have in our organisation. SKY NEWS

Bank of England to
boost watchdog role after failing to spot forex rigging

The Financial Conduct Authority fined five leading banks
including the taxpayer-controlled Royal Bank of Scotland a total of £1.1bn in
November for rigging the foreign currency markets. Penalties from the US
authorities brought the total tally to a record £2.6bn. The investigations
centred on traders’ use of chat rooms to coordinate currency rates in the
minutes leading up to a daily 4pm “fix”. Now the Bank of England plans to beef
up its watchdog role after it failed to spot one of the biggest scandals in the
City’s recent history. The central bank said a “root-and-branch” review of its
market intelligence operations had found that some staff were unfamiliar with
the way City firms operated. Last year the Bank of England called in one of the
most respected figures in the legal world, Anthony Grabiner QC, to investigate
allegations that some of its staff may have been involved in manipulating the
£3 trillion-a-day foreign exchange markets for almost 10 years. But he has warned
the Treasury select committee that a draconian approach to regulation of
London’s financial markets could chase business to New York or Frankfurt. Grabiner
told the committee: “My own view is that you can’t leave a market of this size
in an unregulated form. You really do need to have a careful look at it, but
you must not undermine the valuable marketplace you have created because if you
make it too expensive or too complicated it’ll end up in Frankfurt or New York
or somewhere else and then UK Plc loses out.” GUARDIAN

Steve Webb said today that the Government and regulators had
a duty to 'restore faith and fairness in British pensions' as the City
Watchdog, the Financial Conduct Authority, and the Department for Work and
Pensions called for evidence about 'transaction' charges on defined
contribution pensions - ones where worker and employer contributions are taken
and invested to grow a retirement fund. Myriad fees are deducted from worker's
pensions savings that are not made explicit in the headline cost. These seemingly
small percentages can eat huge chunks of a pension - the difference between a
0.75 per cent 3 per cent a year charge can be £20,000 for someone paying in
£200 a month for 20 years. Charges can range from fees paid to stock brokers
and tax on buying shares to research purchased by fund managers to help them
make investment decisions. The FCA commissioned research that showed there may
be as many as 40 implicit or explicit charges that apply to a group personal
pension. Taken together, these can double or more the overall cost to the end
investor. Yet despite this, investors are never given the total cost on
including these charges. Instead an 'ongoing charge figure' is quoted that
excludes transaction costs. A report by the Financial Services Consumer Panel -
which is paid for by the Financial Conduct Authority - from November said that
the hidden nature of transaction costs, and the fact that fund managers can
simply raid investors' money to meet them, mean that they have no incentive to
drive costs lower. Charges are so opaque, the report said, that 'even fund
managers frequently do not appear to know' how much they really amount to, and
that 'around two-thirds of investment managers could not provide information on
transaction costs'. The Panel advocated moving to a single fee that encompasses
all costs 'where the asset manager is no longer free to extract unlimited
charges from investors’ funds entrusted to it.' It said that previous attempts
to improve disclosure and cap costs have failed in part due to 'stiff and
effective industry resistance', and that 'consumers continue to suffer
detriment 17 years after problems were first highlighted'. Regulators have been
working to give pension savers a better deal. The introduction of Independent
Governance Committees will be accompanied by a charge cap of 0.75 per cent on
the default funds within workplace pension schemes. But this cap does not
include transaction costs. DAILY MAIL